Evaluating the stability policy in the banking industry on the efficiency of the Islamic banking system compared to conventional banking by using the difference-in-difference estimator.

Subject Areas : Islamic finance

Bijan Safavi ¹ , Saide Nasibeh Taheri ² , Fatemeh Zandi ³ , Mahnaz Rabiei ⁴

1 - Department of Economics, South Tehran Azad University, Tehran, Iran
2 - , Economics, South Tehran Azad University, Tehran, Iran
3 - Department of Economics, South Tehran Branch, Islamic Azad University, Tehran, Iran.
4 - , Department of Economics, South Tehran Azad University, Tehran, Iran

Received: 2023-12-06 Published : 2025-03-19

Keywords: banking stability, banking system efficiency, Islamic banking, conventional banking, the implementation model of difference in difference policy,

Abstract :

The purpose of this article is to evaluate the stability policy in the banking industry on the level of efficiency of the Islamic banking system compared to conventional banking. For this purpose, the difference in difference (DID) policy implementation model is based on the annual data (1970-2021) of the countries of the experimental group (Islamic banking system), which were licensed to operate Islamic banks in 1983, in contrast to the countries of the control group (banking sector traditional of the study countries). Based on the obtained results, the difference of the effect of policy implementation (σ) for the member countries of the experimental and control groups is negative and equal to -3.447, which indicates the success of the policy implementation effect for the countries of the experimental group including; Iran, Malaysia, Bangladesh and Saudi Arabia, which implemented the Islamic banking system in 1984, in contrast to the traditional banking sector of the control group countries include; Malaysia, Saudi Arabia, Bahrain and Turkey, and in other words, the implementation of Islamic banking policy has led to more stability in the banking industry and the efficiency of the Islamic banking system, although the impact is low. Therefore, paying attention to the stabilizing aspects of Islamic banking can play an important role in improving the banking stability of countries, and increasing stability and stability in the macro economy will reduce costs and increase efficiency.